How you can take your pension money

Your pension pot doesn’t automatically turn into a regular income or get sent to you as a lump sum. You need to tell us how you want to take your money – and there’s a few different ways to choose from.

How to take money from your pension

Warning! Your pension pots are meant to provide an income for your retirement. It may be tempting to cash them in for other things, but you may be left only with the State Pension to live on and any other savings you have.

If you haven’t already received any guidance or advice from a financial adviser who specialises in retirement planning, we strongly recommend that you contact Pension Wise for free, impartial guidance about your options.

When you’ve made your decision about accessing your money with The People’s Pension, complete the claim form in your Online Account. Or alternatively, fill in and return the printed form we send you six weeks before your selected retirement date.

Please note, with The People’s Pension, there is an annual management charge made up of 3 elements – an annual charge of £2.50, a management charge of 0.5% of the value of your pension pot each year and a potential rebate on the management charge. To help you save more, typically this rebate is between 0.1% on savings over £6,000 and 0.3% on savings over £50,000. If you take out your money you may not receive this rebate. Find out more about how the rebate works when you take money out of your pension pot.

Your retirement options at a glance

Not all of these options are available from all pension providers. But if yours doesn’t offer the option you’re looking for, you can move your money to a pension company that does.

And you don’t have to choose just one way. You can mix your options if you want.

It’s a big decision. And if you need some help understanding and choosing between your options, you’ll need to know about your guidance and advice options﻿ too.

1. Keep it where it is

If you don’t need your pension pot right now, you can leave it invested.

This gives you more time to save and for your pension pot to grow. But, as with all investments, there’s a risk that the value can go down as well as up.

Tax considerations when taking money from your pension﻿

It’s important to understand the tax implications of taking your pension savings – the amount of tax you’ll have to pay can be a major deciding factor when you’re choosing how to take money from your pension pot.

You’ll also need to watch out for emergency tax when taking money from your pension.

Continuing to save into a pension after you start taking your money

You can start to take money out of your pension savings once you reach 55, even if you’re still working.

If you’re still going to be employed, it makes sense to keep saving into your workplace pension too – so you don’t miss out on the contributions that your employer will pay in alongside your own.

Or even if you’re planning to stop working, you can still continue paying into your pension savings as well as taking money out.

Considerations if you’re going to continue saving

If you’re going to continue saving, you need to think about this when you’re deciding how to take money out of your pension pot.

Because the way you choose to take your money out will affect how much you can continue saving and get tax relief on. Please note that you won’t be able to receive tax relief on your pension contributions after age 75.

If you take money from your pension in certain ways, it can reduce the amount you can pay into a pension and receive tax relief on in future. This is called your money purchase annual allowance.

You can keep your pension pot with us for as long as you like. And when you do decide you want to access your pension pot later down the line, you can choose to take it through any of the retirement options available from The People’s Pension, at any point you choose (after you’ve turned 55).

If you take all of your pension pot in one go, you won’t be able to then choose any other options because you won’t have any money left in your pension pot to take.And no matter how much you had in your pension pot to begin with (whether it’s more or less than £10,000) – your account with us will be closed once you’ve taken it all.

If you take part of your pot a bit at a time, taking your tax-free cash gradually, you can use the rest of your pot to take any other retirement option available from The People’s Pension.Or you can continue to take it a bit at a time, taking your tax-free cash gradually. Normally you’d need to have more than £10,000 in your pension pot to do this – but if you’ve already taken one lump sum in this way, you may be able to do it again even if you have less than £10,000 in your pot.

If you choose to take your pot a bit at a time, taking your tax-free cash up front, you have to take all of your tax-free cash (up to 25% of your pot), and move all of the rest of your pot into a flexi-access drawdown account. But, if you change your mind later down the line, you could use what’s left in your flexi-access drawdown account to buy a guaranteed income for example. And if you continue saving with The People’s Pension, you’ll start building up your pot with us. So you can claim your pot through any of the retirement options available from The People’s Pension – once you’ve built it up to a set minimum amount again. (For example, you need at least £2,000 in your pot to move it over to an existing flexi-access drawdown account.)

If you want to transfer to another provider to buy a guaranteed income, or if you transfer to another provider to take any retirement option – you’ll have to transfer your whole pot.Your account with us will then be closed, so it will depend on your new provider’s rules as to which options are available to you.But generally, you can’t normally cash in or change your guaranteed income once you’ve made the agreement.

Retirement scenarios

Deciding how to take your pension savings is a personal decision – we can’t tell you what’s right for you personally. But you can get an idea of how different people take their savings in different ways, by reading our quick case studies…

Meet Rob…﻿

Rob works full-time and plans to stop work completely at 65﻿

As the State Pension age has started to change from age 65 to 66, Rob will need to wait until he reaches his State Pension age before he is able to claim his State Pension.

He has three pension pots he has saved up with three different employers.

He plans to merge two of the larger pots together to create a fund that will provide him with a regular income. The smaller pot he wants to cash in to buy a new car.

Meet Rishi…

Rishi plans to retire next year at 58 ﻿

He’s saved into his pension since he was 20 and has built up a reasonable pension pot.

He’s recently been unwell so wants to spend more time with his family. He plans to take a lump sum from his pension for a family holiday then take a regular income.

His ill health will help him secure a good level of guaranteed income from an annuity.

﻿Meet Nicola…

Nicola enjoys her job but wants to go part-time from the age of 60 and retire at 65 ﻿

She plans to take a small lump sum from her pension to pay off her credit card and then another lump sum and a regular income when she stops working.

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